The Seventh Circuit Court of Appeals recently joined the circuit courts wrestling with the issue of whether an implied certification that a company will comply with the law may be a “claim” that violates the FCA. This doctrine treats an invoice submitted by a contractor as an implicit representation that the contractor has complied with any relevant contract terms, laws, or regulations, a representation that is false if the contractor knows it has not actually complied. In United States ex re. Nelson, No. 14-2506 (June 8, 2015), the relator sued a for-profit education company, alleging among other things that the company had submitted false certifications of compliance with Title IV, despite knowing that it had unlawfully recruited students, paid unlawful incentive payments, failed to remain accredited, and committed other violations of the statute. The District Court judge granted summary judgment in the schools’ favor, and the Seventh Circuit upheld the ruling.
The court ruled the relator’s theory does not lead to FCA liability, for two reasons. First, the relator did not sufficiently demonstrate the defendant knew the certifications were false at the time of submission. See also United States ex rel. Grenaydor, No. 13-3383 (7th Cir. Dec. 3, 2014). Second, the court held that a breach in a condition of participation in a federal program does not mean that claims for payment submitted after the breach were themselves false. For example, a claim submitted after a false certification could have been for services that were appropriately rendered, and for which the defendant was eligible to receive payment.
Nelson settles (for now) the question of whether an implied certification theory by a relator may give rise to FCA liability. It also widens a split among appellate courts who have addressed the issue. Currently, the First, Second, Third, Fourth, Sixth, Eighth, Ninth, Tenth, Eleventh, and D.C. Circuit all have ruled the FCA has been triggered by submission of a false certification of legal compliance. The Fifth and Seventh Circuits do not recognize the doctrine.